Obrimah Blog, founded in 2014 by 'Tunde Obrimah, believes that the time has come for Nigeria to embrace the challenge of progress and development in a substantial, concrete sense.

We bring a huge commitment to offer our country the type of media that will advocate for the people and nudge our nation on the path of development and social reengineering. This is a place to learn, no age limit, no discipline limit, no gender limit, no tribal limit, and no religious limit. Welcome.

Savings Foundation To Building Wealth

savings-foundation-to-building-wealth

The article for this week is a request from a friend who wants to know how to save and build wealth. I’ve also learn’t a lot from carrying out this study.

Financial Management and Planning

Personal financial management is about budgeting & planning which includes all financial decisions and activities of an individual, such as: insurance, savings, investing, debt servicing, mortgages and more. Financial planning generally involves analyzing your current financial position and predicting short-term and long-term needs.

Wealth Decisions

To accumulate wealth over time, you need to do three things:

The Desire to make it happen: This means that before you begin to save or invest, you need to make that decision or have the determination to make it and succeed at it.

The will to save: Once you have an income that’s enough to cover your basics, you need to develop a proactive savings plan, the suggestion is try to save 10% of your income.

Strategy to invest: Once you’ve begun a monthly savings goal, you need to have a plan to move from savings to investment and to invest prudently.

Depending on your level of self-discipline there are four levels of wealth management that can be attained:

Job Security (employee)

Financial Security (self-employed)

Financial freedom (developer)

Financial independence (investor)

Job security: Job security is the assurance a person receives that a current position is secure without the risk of unemployment accompanied with regular income.

Financial security:Financial security refers to the peace of mind you feel when you aren’t worried about your income being enough to cover your expenses. It also means that you have enough money saved to cover emergencies and your future financial.

Financial Freedom: Financial freedom is most commonly defined as the point at which your assets (stocks, bonds, real estate, etc.) produce enough income to cover your baseline expenses.Financial freedom depends on you and how you perceive it.

Financial Independence: Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses.

4Savings Culture and returns

There seems to be a relationship between savings culture of a people and prosperity of the nation. The data below gives the percentage household savings and savings as a percentage of GDP of some countries:

Country Household % of GDP

China – 38% 51%

Switzerland – 19% 7%

India – 7% 29.8%

Sweden – 72% 29.0%

Germany – 67% 26.8%

France – 89% 21%

America – 6% 5%

Nigeria – 5%(est.) 4%

Philippines – 5%(est.) 9%

A Chinese proverb wisely states: “The journey of a thousand miles begins with one step.” Maybe this explains why the Chinese have lots of funds to invest both within and outside their country. India is also an emerging economy and the high savings culture may also explain their expansion and investments outside of India.

The book Richest man in Babylon by George Classon is a must read for anyone planning to start a savings/investment culture.

The table below shows return on savings/investment over a 20-year period and various amounts and various estimated return on investment. This computation is in Naira, the Nigerian currency.

The implication of this table is that if you are consistent and invest as little as N5,000 every monthly 5% return on investment without missing any month, on the 12th month of the 20th year you will have saved N2.03 million. The challenge is that we are all not willing to wait that long, we all want the jack pot like yesterday.

Financial Intelligence

Financial intelligence is about making money work for you. When money works for you:

Every Naira is an employee. Each Naira works to bring you even more Naira while you’re asleep.